Understanding the Market — Entrepreneurship STD 11 Commerce — Question

An entrepreneur enter a foreign market through:

1. Indirect Export: The easiest and a normal way of going global is through export. Occasional exporting is a passive level of involvement where the company exports from time to time on:

1. Its own initiative.
2. Work through independent middlemen on being approached by them.
3. In response to unsolicited orders from abroad.

When the company makes a commitment to expand through exports, the least change in the company's product lines, workforce organization, investments or missions are involved and thus is a convenient mode of expanding.

2. Direct Export: Companies eventually may decide to handle their own exports. Through this strategy of entering global market, the enterprise assumes somewhat greater risk and investment, but so is the potential return. The company can carry on direct exporting in several ways as:

• Through Domestically based Export Division or Department.
• Through Overseas Sales Branch or Subsidiary Establishment.
• Nominations Foreign based agents or distributors to sell the goods on behalf of the company.

3. Licensing: Licensing represents a simple way for a manufacturer to become involved in international marketing. The licensor licenses a foreign company to use a manufacturing process, trademark, patent, trade secret or other item of value for a fee or royalty.

This way, the licensor safely and easily can gain entry into the foreign market at:

• Little risk.
• The licensee gaining production expertise or 'well-known product or name without having to start from scratch.

4. Contract Manufacturing: Another entry method for a local firm to go global is through contract manufacturing. Here, the firm engages local manufacturers to produce the product for them.

When SEARS opened departmental stores in Mexico and Spain, they found qualified local manufacturers to produce many of its products. This not only significantly reduced SEARS cost of production but led the company to earn envious revenue position.

5. Joint Ventures: Mostly, a joint venture is a restricted or a temporary partnership between two or more firms to undertake jointly to complete a specific venture. The coventures (parties) participate in the equality and operations of the business, sharing profits or losses in then agreed ratio. To go global, at times when one wants to take limited, calculated risk, joint ventures might serve the best interest.
6. Direct Investment: The ultimate form of global involvement is through direct ownership of foreign-based manufacturing facilities. No doubt, here the firm exposes its large investment to risks by buying partly or full interest in a local company or by building its own enterprise.